THEIR VIEW: Loan modification a better choice for both parties

Recently, West Virginia became one of 46 states to take part in a settlement of a robo-signing case involving Lender Processing Services and its subsidiaries. Lender Processing Services has been accused of robo-signing mortgage documents and other improper default servicing procedures.

Under the terms of the $127 million settlement, Lender Processing Services and its subsidiaries would be required to implement business practice reforms and correct any error-ridden documents it executed. It would also prohibit employees, or people without firsthand knowledge of the facts in the documents, from signing.

The events leading to the settlement began in May 2011, when California's attorney general Kamala Harris and Illinois' attorney general Lisa Madigan subpoenaed Lender Processing Services to investigate robo-signing claims. Later that year, Nevada's attorney general Catherine Cortez Mastro followed suit after a Nevada grand jury indicted two employees on charges of supervising a robo-signing scheme, which led to the filing of thousands of fraudulent documents.

This case and its settlement are significant because robo-signing has played a troubling role in the country's mortgage loan crisis. After the financial crisis struck, many families found that they could not pay their loans and defaulted. Yet rather than work out an arrangement for more affordable payments, usually known as a loan modification, many lenders responded with knee-jerk efforts to foreclose upon the properties.

This resulted in countless cases where lenders filed court documents that were riddled with significant errors because the lenders who signed off on them did not even check to see whether the declarations involved were accurate, or did not establish that the lenders were holders of the original note for the loan. Yet because of lenders' actions, many families lost their homes or had to file for bankruptcy to avoid losing them.

If the settlement is accepted by all, Lender Processing Services would then review documents that it executed between the dates of Jan. 1, 2008, and Dec. 31, 2010, to determine whether any need to be corrected. The company is setting up a hotline that consumers can call to alert them to any errors and request a correction. Lender Processing Service would also submit to increased oversight of the default services provided, and to a review to ensure that all third-party fees were reasonable.

Settlements like these are a victory for any homeowner with a mortgage. Defaulting on a home loan -- which is understandable, due to the sour economy -- should not automatically put you at risk for losing the home that you might have owned for years.

You should have more options than hiring a West Virginia bankruptcy attorney and filing for Chapter 13 bankruptcy. While filing for bankruptcy would stop the foreclosure process and allow you to make more affordable payments on a three-to-five year plan, it is a big step and requires a lot of responsibility. It would be much easier for many families to simply negotiate a loan modification with the lender, with the result being that the lender still gets its money, only on terms that are easier for many cash-strapped families to meet.

The Wolfe Law Firm is an Elkins personal injury law firm founded by Dorwin Wolfe.